Bipartisan efforts to tighten U.S. financial regulation ground to a halt in the Senate on Friday, leaving Democrats to proceed on their own and painting Republicans into an uncomfortable political corner.
After months of public debate and closed-door talks, Senate Banking Committee Chairman Christopher Dodd, chief negotiator for the Democrats, said he is at an impasse with his Republican counterpart, Senator Richard Shelby.
Dodd said in a statement he will begin drafting new legislation to be considered later this month.
Last night, Senator Shelby assured me that he is still committed to finding a consensus on financial reform, but for now we have reached an impasse, Dodd said.
While I still hope that we will ultimately have a consensus package, it is time to move the process forward.
Dodd said he hopes to incorporate many of the agreements reached in bipartisan negotiations over the past two months into a new proposal.
Democrats want to establish a new regulator to police systemic risk in the financial system, new procedures for dealing with large financial firms in distress, and new protections for investors and financial consumers.
The situation highlights the close alliance Republicans have cultivated with Wall Street and big banks since 2008.
The House of Representatives in mid-December approved a financial reform bill calling for the most sweeping changes since the Great Depression. Bank lobbyists fought for months against it. All House Republicans voted against the bill.
While Republicans have conceded that regulatory changes are needed, they have not offered a comprehensive strategy of their own and have consistently opposed Democratic measures.
As the debate has worn on, public anger over taxpayer bailouts of financial firms, and big bonuses being awarded to top executives, has grown. As November elections near, Democrats are trying to portray Republicans as the obstacles to reform and the allies of big business, betting it will win votes.
Democrats suffered a major blow in January with the loss of a special Senate election in Massachusetts. That reduced their voting bloc in the Senate by one, making passage of a financial reform bill dependent on winning some Republican support.
President Barack Obama earlier this week pressed Democratic lawmakers to redouble their efforts to pass financial reforms, telling them our mission is far from accomplished.
(Additional reporting by Karey Wutkowski; Editing by Leslie Adler)